Its rare to read a book that changes the way you think about the world, but this book did that for me. Graeber approaches finance from the view of an anthropologist rather than an economist and, as the title suggests, presents a history of debt and, almost incidentally, money. And frankly its not a pretty sight. As presented, the history of debt is intertwined with that of slavery, peans and servitude – not a pleasant combination.
The author starts by debunking an economists’ myth – the barter economy. A favourites of textbooks from Adam Smith onwards, it is suggested as the inefficient alternative that money was created to avoid or improve on. Unfortunately from an anthropologists viewpoint it pretty much never existed anywhere. The author gives several examples of cultures which had customs for exchanging, gifting and interacting with those outside their immediate community. Most of these seem strange to the modern, western mind but give some idea of how alternative economies can get.
Its the latter point that perhaps leads into, for me, the key idea presented in the book. This is that the passing of goods & services in society is done in three ways. The first is that of exchange – we buy something & pay for it, or we swap or barter goods. The second is what he, provocatively, calls communism – where we do it because it is good for the community with no immediate expectation of something in return. The third is hierarchical – typically gifts to a chief, king or government, though it is not always a one way transaction. It doesn’t take too long to realise that even in today’s troubled society the much of what we do, possibly the majority, is communal, for friends or family. Yet economics focuses solely in the area of exchange, perhaps explaining a significant part of its inability to explain the real world well.
Of course, much of life does not slot simply into one of these categories. I’d make the case that taxes actually cover all three. Unfortunately that affects the narrative element of the story that the author tries to tell. It is not merely non-linear, it is muddled & messy and the book suffers as a consequence. Having said that it is clear that there is no overarching narrative, no ‘one story fits all’ that can be imposed on history. Both debt and coinage have risen and disappeared over history, and each time it really has been different.
Perhaps the theme that mostly strongly occurs is that debt can have different effects when structuring in different ways. When based on community ties, where you know how good your neighbours credit is, is can be the grease that makes the local economy run smoothly. Especially when there is a penalty for failure to repay, generally severe but short lived. When debts become more impersonal (which the presence of coinage facilitates) and the penalties involve the debtor and their descendants being enslaved the perhaps things are a little more difficult. The author could make more explicit the role of coinage in this. Its origins, typically as a way of breaking down seized treasure to pay off mercenaries in a liquid way, are rather less savoury than the economists fairy tail. There is a paradox, in that it facilitates (causes?) the break down of the community based trust by allowing all transactions to take place as if they were at arm’s length. After all, trying to asses the credit worthiness of everyone you deal with is hard work which money does simplify. So coinage can lead to a less communal society. Yet the significant economic progress we have achieved over the last 200 years is impossible to imagine without it. So while we all deplore the lack of community, we won’t give up our iPhones and don’t realise these are joined at the hip.
The last third of the book is history of debt from 3500BC broken down into 4 major eras, with the last one starting in 1971 when the US abandoned the gold standard. The last seems a bold step, despite the uncertain times that we live in. Currently there is a desire for change on the street (and the author has strong links to the Occupy movement.) But as yet its not entirely clear what the change that they’d like to see really is. While this book contributes to the debate it gives little in the way of answers other than suggesting debt can be dangerous. We need a better idea than that. The vested interests lined up against them are strong it would seem that even with a clear idea of where we should go the prospects for significant reform are limited. Without it progress cannot be made.